About Michael Edward WalshMichael Edward Walsh is a research fellow for African Studies at the Johns Hopkins University School of Advanced International Studies. Separately, he is also president of the Islands Society and director of the Overseas Military Bases in Africa Initiative. Over the last decade, Mr. Walsh’s work has appeared in dozens of international news outlets and think tank publications. He has also received a number of awards, including the Vivian Award from the National Press Club and a Certificate of Appreciation from the U.S. Joint Chiefs of Staff.

About the Islands Society
The Islands Society is a “Top-Rated” American 501(c)(3) nonprofit organization. Its mission is to inspire and empower islanders to participate in foreign affairs and overseas engagements in order to affect positive change in their local communities. The nonprofit therefore develops and implements projects that are designed to help islanders realize their full potential on the world stage.

On 17 November 2017, The Asia Maritime Transparency Initiative at the Center for Strategic and International Studies (CSIS) published a fieldwork report on the People’s Liberation Army Security Base in Djibouti by Michael Edward Walsh. The report was later featured on the Africa Security Monitor as part of the Overseas Military Bases in Africa Initiative.

About Michael Edward WalshMichael Edward Walsh is a research fellow for African Studies at the Johns Hopkins University School of Advanced International Studies. Separately, he is also president of the Islands Society and director of the Overseas Military Bases in Africa Initiative. Over the last decade, Mr. Walsh’s work has appeared in dozens of international news outlets and think tank publications. He has also received a number of awards, including the Vivian Award from the National Press Club and a Certificate of Appreciation from the U.S. Joint Chiefs of Staff.

About the Islands Society
The Islands Society is a “Top-Rated” American 501(c)(3) nonprofit organization. Its mission is to inspire and empower islanders to participate in foreign affairs and overseas engagements in order to affect positive change in their local communities. The nonprofit therefore develops and implements projects that are designed to help islanders realize their full potential on the world stage.

About Michael Edward WalshMichael Edward Walsh is a research fellow for African Studies at the Johns Hopkins University School of Advanced International Studies. Separately, he is also president of the Islands Society and director of the Overseas Military Bases in Africa Initiative. Over the last decade, Mr. Walsh’s work has appeared in dozens of international news outlets and think tank publications. He has also received a number of awards, including the Vivian Award from the National Press Club and a Certificate of Appreciation from the U.S. Joint Chiefs of Staff.

About the Islands Society
The Islands Society is a “Top-Rated” American 501(c)(3) nonprofit organization. Its mission is to inspire and empower islanders to participate in foreign affairs and overseas engagements in order to affect positive change in their local communities. The nonprofit therefore develops and implements projects that are designed to help islanders realize their full potential on the world stage.

Last year, Japanese officials revealed that the Japanese Government would lease additional land to expand the Japan Self-Defense Force Base in Djibouti. According to media reporting at the time, the expansion of the base is intended to serve as a counterweight to the expanding strategic footprint of China in Africa and the Middle East. The Japanese Government still plans to lease additional land to expand the Japan Self-Defense Force Base in Djibouti. In fact, the Japanese Government hopes to finalize a lease on the additional land within a week or so. However, the Japanese Government does not intend to build on this land until the next fiscal year. This is due to cyclical budgetary constraints. Once the lease is finalized, it will be interesting to see whether the expansion of the base will lead to a further expansion of the functions of the base. At the end of the day, the Japan Self-Defense Force Base in Djibouti serves as an important mechanism for advancing the normalization agenda of the Abe Administration. The expansion of the base therefore not only provides an opportunity to further expand the functions of the base. It also provides an opportunity to further reform Japanese security policy.

The Japan Self-Defense Force Base in Djibouti

The Japan Self-Defense Force Base in Djibouti is the first Japanese overseas military base since World War II. Opened on 5 July 2011, the base is located on the northwest side of the Djibouti-Ambouli International Airport. Unlike the French Naval Base of Djibouti, the Japan Self-Defense Force Base in Djibouti does not provide docking for naval ships. It is also considerably smaller than the American and French expeditionary bases at Djibouti-Ambouli International Airport. However, the base does provide the Japan Self-Defense Force with direct access to a joint civilian/military-use airport. It also provides the Japanese Self-Defense Force with easy access to the American, French, and Italian expeditionary bases. This is useful in supporting multinational operations.

Overseas Military Bases at Djibouti-Ambouli International Airport (Source: OMBAI)

The Function of the Japan Self-Defense Force Base in Djibouti

The Japan Self-Defense Force Base in Djibouti was specifically designed to support counter-piracy operations in the immediate vicinity of the Gulf of Aden. The primary function of the base remains to provide support for counter-piracy operations. However, the Japanese Government now supports counter-piracy operations beyond just the immediate vicinity of the Gulf of Aden. In fact, the Japan Maritime Self-Defense Forces regularly conduct counter-piracy operations in a block of the Indian Ocean south of the island of Socotra Island, Yemen and east of the Puntland State of Somalia. These operations are in support of Combined Task Force 151 (CTF-151).

The function of the base has also expanded beyond support for counter-piracy operations. In recent years, the Japanese military has used the base to support peacekeeping operations in South Sudan. The Japanese military has also used the base to support the emergency evacuation of Japanese citizens from South Sudan. More recently, the function of the base expanded to support for multilateral non-combat exercises. In fact, the base was used to a joint-nation noncombatant evacuation operation (JN-NEO) exercise less than two months ago. This exercise was initiated by the Japanese Government. And, it marked the first time that the base has supported this kind of activity.

The Expansion of the Japan Self-Defenses Force Base in Djibouti

The Japan Self-Defense Force Base in Djibouti was not designed to support current operational demands on the base. That is one of the main reasons why the Japanese Government is pursuing the lease of additional land that can be used to expand the base. According to foreign military officials, the Japanese Government has already identified an approximately 3-hectare parcel of land that they intend to lease. This land is part of an empty lot adjacent to northeast side of the current base. The Japanese Government has largely settled on the terms for the lease. In fact, the Japanese Government is close to finalizing the lease with the Djiboutian Government. The Japanese Government hopes to be able to do so in the next week or so. However, the Japanese Self-Defense Force is not in a position to immediately build upon the additional land due to cyclical budgetary constraints. For this reason, it is unlikely that the base facilities will be expanded before the next fiscal year.

If the expansion of the Japan Self-Defenses Force Base in Djibouti moves forward, it will be interesting to see whether the expansion of the base will be followed by an expansion of the functions of the base. As pointed out in a separate article, Japanese military activities in Eastern Africa are a significant element in Abe’s “historical mission” to amend the Japanese Constitution. In recent years, the Abe Administration has used counter-piracy operations in the Western Indian Ocean, peacekeeping operations on the African continent, emergency evacuation operations from Africa countries, and multilateral exercise in Djibouti to advance incremental changes in Japanese security policy. The Japanese Self-Defense Force Base in Djibouti enables these kinds of activities in Africa and the Middle East. The base therefore serves a higher political purpose. It is an important mechanism for advancing the normalization agenda of the Abe Administration. In this light, the expansion of the base not only provides an opportunity to further expand the functions of the base beyond support for counter-piracy operations. It also provides an opportunity to further normalize Japanese security policy beyond the reforms that have already taken place.

The Chinese military on August 1 formally opened its first overseas military base in Doraleh, Djibouti. According to the Chinese government, the People’s Liberation Army (PLA) base in Djibouti will be used to support peacekeeping and humanitarian missions in Africa and the Middle East. However, there are strong indications that the base will also be used to facilitate surveillance activities across the region and beyond. The Chinese base therefore raises significant operational security concerns for U.S. military officials stationed at U.S. military installations in Africa and the Middle East. Some even worry that the Chinese base “could provide a front-row seat to the staging ground for American counterterror operations in the Arabian Peninsula and North Africa.” Nevertheless, officials stationed at Camp Lemonnier—the U.S. naval expeditionary base in Djibouti—do not appear to view the Chinese military as a strategic threat to the U.S. military in the Horn of Africa, and see it in a more nuanced light.

The Current Situation

Over the past three months, I have been conducting field interviews with U.S. military officials stationed at Camp Lemonnier as part of my doctoral research on counter-piracy operations off the Horn of Africa. Those interviews reveal that, rather than a strategic threat, those officials view the PLA as an opposing force with which the U.S. military has to share a common operating space. The U.S. military is therefore trying to find ways to increase cooperation with their Chinese counterparts. However, little progress has been made to date. To some extent, this is because Chinese military officials have been overly aggressive in their interactions with their U.S. counterparts. Until that changes, U.S. military officials express doubt that they can make much progress on achieving that increased cooperation in the Horn of Africa region.

The Short View

Over the past few months, U.S. military officials acknowledge that there have been a number of interactions between officials at Camp Lemonnier and Chinese military officials at the PLA base in Djibouti. However, these interactions have been strictly limited to the most senior officials. On the U.S. side, they have typically been limited to three senior military officials. Because of the aforementioned aggressive behavior, the U.S. military now requires two or more senior U.S. officials to be present during any interactions with their Chinese counterparts. In addition, according to the interviewed U.S. officials, Chinese military officials have also been responsible for a number of unspecified “probing attempts” against the U.S. base. These attempts have significantly increased since the first live fire military drills at the PLA base a few weeks ago. Based on these observations, U.S. military officials are doubtful that their Chinese counterparts are interested in promoting increased cooperation with the U.S. military in the Horn of Africa region.

The Long View

Based on my field interviews, it appears that U.S. military officials are genuinely committed to finding ways to promote increased cooperation with their Chinese counterparts. However, it also appears that the officials are increasingly frustrated by the way that Chinese military officials approach their interactions with their U.S. counterparts. It therefore appears unlikely that there will be a major breakthrough in military-military cooperation between China and the United States in the Horn of Africa region in the near-term. Nevertheless, such cooperation could be possible in the long-term if Chinese military officials demonstrate less-aggressive behavior.

Thanks to millions of dollars in funding from the government of Japan, the Djibouti Regional Training Center (DRTC) opened its doors two years ago. However, the facility has gone largely unused since then. That may be about to change.

In recent weeks, the government of Djibouti has expressed a renewed interest in making use of the facility as a meeting space for events related to the Djibouti Code of Conduct. If this happens, the facility’s potential will finally start to be realized.

History of the Djibouti Regional Training Center (DRTC)

On October 29, 2011, the foundation stone for the DRTC was laid by the president of the Republic of Djibouti and the director of the Maritime Safety Division at the International Maritime Organization (IMO). Funded through the IMO Djibouti Code of Conduct Trust Fund, the new facility was intended to promote successful implementation of the Code of Conduct Concerning the Repression of Piracy and Armed Robbery Against Ships in the Western Indian Ocean and the Gulf of Aden. Specifically, it was intended to provide a meeting space for events related to the Djibouti Code of Conduct and office space for coordinating similar events across the region.

Since the ribbon-cutting ceremony, the facility has gone largely unused.

Although the facility boasts one of the best conference auditoriums in the country, it has only hosted a handful of events. According to some experts, this is because of a lack of funding for events and basic infrastructure problems at the facility. According to others, it is because of serious limitations placed on access to the facility during the construction of the Chinese military base next door. Whatever the reasons, the facility has not played the “key role in regional capacity-building initiatives under the Code of Conduct” originally envisioned by the IMO.

Conference on the Djibouti Code of Conduct (DCoC Conference)

On October 29, 2017, the DCoC Conference was held at the DRTC. It included delegations from Djibouti, the European Union, France, Japan, the United States and Africa’s Intergovernmental Authority on Development. It also included speakers from the IMO and the Interregional Maritime Safety Institute, among others.

If the DRTC becomes useless, it would not just harm the reputation of the government of the Djibouti as an aid recipient: it would also harm the reputation of the IMO as an aid organization.

Although most of the presentations focused on specific regional maritime security issues, the conference included a presentation on the facility’s potential. After these presentations, the DRTC director took attendees on a guided tour of the facility. During the tour, she noted that the government of Djibouti was interested in putting the facility to greater use, but it lacked the funds to do so. So, she appealed to attendees to find ways to fund future programming at the facility.

The DCoC Conference is a sign that the government of Djibouti is interested in more fully realizing the potential of the DRTC. It also shows that the government is willing to make use of the facility as a meeting space for events related to the Djibouti Code of Conduct. This is an important development because the facility has hosted only one other major event over the past two years and none since completion of the Chinese military base, and some experts have started to question whether the government of Djibouti is at all interested in making use of the facility now that the Chinese base is next door.

Future of the DRTC

There is an old Afar proverb that goes, “A son can be difficult in three ways. Either he isn’t born, or being born dies, or grows up and becomes useless.”

If the DRTC becomes useless, it would not just harm the reputation of the government of the Djibouti as an aid recipient: it would also harm the reputation of the IMO as an aid organization. For this reason, many will welcome the news that the government of Djibouti is interested in more fully utilizing the facility as a meeting space for events related to the Djibouti Code of Conduct.

However, it will take more than just an expression of interest to more fully utilize the facility as a meeting space. As the DCoC Conference shows, the government of Djibouti will require additional funding from foreign donors to support programming at the facility, and these foreign donors will need reassurances that the government will make proper use of those funds to deliver that programming.

It therefore remains difficult to predict what the future holds for the DRTC. For now, the IMO can only hope that the DRTC will become an important asset for Djibouti and the region in the years to come.

Note: This article was first published by the CPD Blog of the Center on Public Diplomacy at the University of Southern California.

Tomorrow, Michael Edward Walsh will attend the Conference on the Djibouti Code of Conduct. The event is being held at the Djibouti Regional Training Center in Doraleh, Djibouti.

About Michael Edward Walsh

Michael Edward Walsh is a research fellow for African Studies at the Johns Hopkins University School of Advanced International Studies. Separately, he is also president of the Islands Society and director of the Overseas Military Bases in Africa Initiative. Over the last decade, Mr. Walsh’s work has appeared in dozens of international news outlets and think tank publications. He has also received a number of awards, including the Vivian Award from the National Press Club and a Certificate of Appreciation from the U.S. Joint Chiefs of Staff.

About the Islands Society

The Islands Society is a “Top-Rated” American 501(c)(3) nonprofit organization. Its mission is to inspire and empower islanders to participate in foreign affairs and overseas engagements in order to affect positive change in their local communities. The nonprofit therefore develops and implements projects that are designed to help islanders realize their full potential on the world stage.

Tomorrow, Michael Edward Walsh will presenting a guest lecture to senior military personnel assigned to the Combined Joint Task Force – Horn of Africa. The lecture is part of the Horn of Africa Experts Speaking Series organized by the Department of Defense.

About Michael Edward Walsh

Michael Edward Walsh is a research fellow for African Studies at the Johns Hopkins University School of Advanced International Studies. Separately, he is also president of the Islands Society and director of the Overseas Military Bases in Africa Initiative. Over the last decade, Mr. Walsh’s work has appeared in dozens of international news outlets and think tank publications. He has also received a number of awards, including the Vivian Award from the National Press Club and a Certificate of Appreciation from the U.S. Joint Chiefs of Staff.

About the Islands Society

The Islands Society is a “Top-Rated” American 501(c)(3) nonprofit organization. Its mission is to inspire and empower islanders to participate in foreign affairs and overseas engagements in order to affect positive change in their local communities. The nonprofit therefore develops and implements projects that are designed to help islanders realize their full potential on the world stage.

On 4 February 2016, Ministers representing Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam signed the Trans-Pacific Partnership (TPP) agreement. At the time, the Ministers remarked, “After more than five years of negotiations, we are honoured to be able to formalise our collective agreement of TPP which represents an historic achievement for the Asia-Pacific region.” However, the United States officially withdrew from the TPP agreement earlier this year. To understand the impact of this development on others in the Asia-Pacific Region, Emma Schneck, a 2016-2017 Future Hawaiian Diplomat, reached out to the Trade and Economic Counsellor at the Embassy of New Zealand in the United States, Philip Houlding.

Many supporters of the TPP, most notably exemplified by US trade ambassador Michael Froman, have claimed that the economic partnership is not exclusively, or even primarily, based on economic incentive or gain. Rather, such supporters argue that the TPP is meant to focus on establishing international norms in regards to employee working standards for conditions and wages. What does New Zealand believe is the most influential aspect of the TPP and why does the country feel the need to support it?

From New Zealand’s perspective, TPP is really a strategic economic agreement. We [New Zealand] are very much an export-dependent and agricultural-dependent economy, so a lot of our exports are agriculture-related. It is very difficult to export agricultural products, because the rules can be quite challenging through the use of high tariffs and other barriers, so from New Zealand’s perspective–as we are a tiny country with 4.5 million people export to over 100 countries–what an agreement like TPP does is alter rules for exporting to make it easier for our companies. This really applies to all exports, from agricultural products through to digital products – it’s easier to deal with one set of rules than several. So, from an economic perspective, it is very crucial to New Zealand that we try to forge better conditions for us to trade.

In regards to the quote from Ambassador Froman, there are lots of positive rules that TPP members are expected to uphold, such as stronger labor standards and stronger environmental standards. These standards are very important to New Zealand and we are very supportive of such measures. We have also been able to get in some other good standards into the TPP agreement, such as a clause stopping international wildlife trafficking. If countries want the economic benefits of being a member in this agreement, then they must adhere to these higher standards.

The United States’ president has officially withdrawn from the TPP. While the involvement of the United States is not completely off the table, the odds of passing such an agreement in this current political climate look rather grim. If the US is out, what does this mean for the future of the TPP? What does it mean for the future of relations between New Zealand and the United States?

Yeah, well on the relationship front, New Zealand and the United States have a wonderful relationship. TPP was a big part of our engagement, however regardless of the US’s involvement with the TPP, we still have a strong relationship with the country. We, like everyone else, are just trying to get to know the new administration, and are trying to figure out the best places in which the US and New Zealand can work together.

This is actually a great time to be talking about the US’s involvement [in TPP], as we just had a meeting with the now 11 member countries of the TPP in which we discussed the future of the agreement. These member countries agreed that they will meet again within the next 6 months to discuss whether or not we can take the TPP forward as 11 instead of 12 member nations, after rounds of negotiations with their own government leaders. I don’t know yet, until the 11 countries have our next meeting, what the state of the agreement is. The positive thing is that all 11 countries have said that they are still committed, and that’s a discussion that is going to continue within the next 6 months or so.

In 2006 New Zealand had spearheaded the “Pacific 4”, an economic partnership between Brunei, Chile, and Singapore. The agreement had “phased out” most tariffs between the nations and put member countries’ goods on an equal platform as local products, resulting in an $145 million and $1 billion trade increase with Chile and Singapore respectively. As this agreement serves as precedent for the current proposed partnership, how does New Zealand plan to transfer this smaller-scale economic partnership to the larger, more encompassing TPP? Likewise, if the TPP fails to be implemented, what would this mean for the fate of the P4?

P4 was initially established as an organization or group that other countries would be able to join. P4 was what we call a “comprehensive agreement”, and phased out as many tariffs and other barriers to trade as possible–so in that respect it continues to serve as a model for TPP. When the United States joined in 2010 under the Obama administration, just with a country as big as the United States coming aboard, it really brought a new life into the agreement.

TPP itself is therefore more of a new agreement rather than a transition from the P4. However, some of the concepts remain. But, the shape is much bigger and more things are covered by the partnership. Legally, P4 is still in effect, nothing has happened to that. But, we will see TPP as a much larger evolution from P4. Formally speaking, the two agreements do not interact with each other. However, I think the philosophy of P4 remains in that TPP is also a comprehensive agreement, and we could invite other countries to join over time.

One of the United States’ proposed amendments to the TPP was the introduction of a judicial entity with the obligation to settle disputes between member countries. Many of those opposed to the TPP agreement have voiced concerns regarding a State’s entitlement to sovereign rule and jurisdiction. Where does New Zealand stand on the incorporation of this judicial body and how does the country believe the inclusion of this entity will alter the future discourse on the TPP?

I think that it’s important to understand that every county has a sovereign right to be part of the agreement or not and the right to withdraw at any point. The agreement itself cannot force a country to do anything, but what it can do is say that the parties think that a particular country is not meeting a part of the agreement. There is a detailed process to follow, but if one country is not upholding its obligations, then the complaining country may be able to withhold some of the benefits of the agreement based upon that decision. We believe that the complaints about the dispute settlement clause are a bit overstated, and countries fundamentally retain their sovereign rights under this agreement – the most basic one being that you can either decide at any point whether your country wants to continue to be in the TPP. We also ensured that there were plenty of safeguards in the TPP, which protect the Government’s right to regulate in the public interest (i.e. to protect the public health or environment).

We have had some of these dispute arrangements in some of our other agreements, and most countries in these agreements don’t take a combative approach to dispute settlement. Having these arrangements in place is helpful, though, because it means that if two countries are unable to resolve a certain issue, you can appeal to an independent body to adjudicate. This being said, if the countries don’t like it, then it is up to them whether they continue to be part of the agreement which is the ultimate retention of sovereignty. The thing that keeps them together is that they believe the benefits of the agreement are worth the costs and will keep these countries together. All of these things are sovereign decisions, and our outlook is that our [New Zealand’s] sovereignty remains intact, which has been our experience with these types of trade deals.

Prior to the United States withdrawal, the proposed TPP member states accounted for 40% of the world’s economy and housed over a billion middle class consumers. Because of the massive scale of this deal, most trade in the Asia-Pacific region would be dominated by the TPP and its members. How would this deal affect New Zealand’s trade relationships with nonmember states, most notably China, who alone accounts for $12 billion of New Zealand’s current trade? For example, is New Zealand open to China being invited to join the TPP negotiations? If so, how would this affect New Zealand’s trade with the United States?

New Zealand and China have a great trade relationship, China is our largest single goods trade partner. As you can understand, we have our own bilateral free-trade agreement that we have signed with China in 2008. So, we don’t see much effect of the TPP on China-New Zealand trade. In terms of whether China will join the agreement, I think that question is probably quite a long way down the track.

What I think would happen, if another country was interested, is that they’d come to the members and basically ask, and we would see from here, but there would have to be a negotiating process between current member states, so it is a long way down the line. New Zealand has always supported a model of open regionalism, which means that if we set standards in these groups and other countries can meet these standards, then we will consider their application. That applies to basically every other country, and we could consider on a case-by-case basis. We support the open model for TPP, but we need to bring it into force first, as I mentioned, before considering any other members. In the meantime, we will continue to have a great relationship with China, and we’re pretty confident and supportive of the entire structure of TPP as well.

Philip Houlding has been Trade and Economic Counsellor in the New Zealand Embassy since January 2015. He is responsible for leading the Embassy’s advocacy efforts in Washington on trade and economic issues, including the conclusion of the Trans-Pacific Partnership trade agreement.

Emma Schneck is a 2016-2017 Future Hawaiian Diplomat. She hails from the island of Kaua’i, Hawai’i. Currently, she is attending Trinity College, where she is pursuing her interest in International Relations. In the future, she aspires to become a diplomat or foreign relations advisor.

The views expressed represent those of the respective contributors. Alternative viewpoints are always welcomed. Please send any responses to pr@islandssociety.org. Our editors will consider any and all responses for future publication.

In 2018, Nauru celebrates 50 years as the world’s smallest independent state. To prepare for this milestone, President Baron Waqa seeks to put Nauru on a sustainable development path. However, its economic future is clouded with uncertainty because Nauru’s revenue sources are undiversified and closely tied to Australia’s immigration policy. Australia’s asylum seeker policy has garnered considerable criticism from international human rights groups, but Nauru’s perspective of hosting the Regional Processing Center (RPC) has received less attention. With a population of around 10,000 people and a rentier state economy, Nauru has faced several internal political and economic crises in the last few decades. In the short term, the RPC provides revenue sources for the government, employment opportunities for locals, supports population growth and encourages changes in institutions. While the RPC on Nauru has helped to revive the country economically, it has done so with political and social costs that stem from its rentier economy legacy with Australia and the phosphate industry. This paper examines Australia’s historical relationship with Nauru and the economic, social and political impacts of the RPC on Nauru. Rather than progressing into a new era of independence separated from a reliance on resource extraction and processing, I suggest that the RPC extends Nauru’s rentier economy status, which has consequences for the stability of its political and economic environment.

Nauru’s Rentier Economy and Dependency on Australia

Australia has a longstanding colonial history with Nauru that has evolved into a new client-state relationship. Australia administered Nauru as a United Nations Trust Territory on behalf of New Zealand and Great Britain until Nauru achieved independence in 1968. From 1909 to 1967, phosphate was extracted “for the purposes of the agricultural requirements of the United Kingdom, Australia and New Zealand” until it was handed over to the Nauruan Local Government Council (Scobbie 1993). Katerina Teaiwa contends that the history of phosphate extraction in the Pacific reveals “Australia’s deep, organic… relationship with Pacific Islands, and the imperial structures upon which contemporary Australia-Pacific relations are built” (Teaiwa 2015, p. 375). During its administration, Australia built schools, hospitals, as well as apartment buildings and facilities for non-Nauruans who worked in the phosphate industry. Services such as roads, police force, were constructed using the Nauru Administrative Fund. The British Phosphate Commission paid for technology and infrastructure that directly supported the phosphate industry. Naurans meanwhile did not receive their own benefits, as these services were provided for all residents of the island (Pollock 2014).

Historically, wealth created by the phosphate industry was shared unequally and led to reliance on a rentier economy. A rentier economy is one in which “the larger part of state revenues typically comes from exporting natural resources…National revenues originate from outside sources, rather than from domestic productive sectors” (Luciani 1990, p. 71). In a rentier state, the financial revenues go to a “narrow elite” that controls its distribution, potentially leading to illiberal governance and corruption (Pál 2016). Dependence on one export in a rentier economy can shape social classes, regime type, institutions, and decisionmaking for policymakers (Kirkpatrick 2017, p. 4). While rich phosphate enabled Australia and New Zealand to become agricultural producers, it stripped Nauru of its arable land and sense of autonomy. Reliance on rents can “create an inertia that is hard to overcome…to create and promote new patterns of development” (Kirkpatrick 2017, p. 4). With minimal land and no tourism, a formally independent Nauru was destined to live off rents from dwindling phosphate.

Due to internal and external factors, Nauru failed to use its rentier status in a way that could create a sustainable and viable economy. From 1968, the government of Nauru retained revenues from phosphate extraction and used it to fund the Nauru Phosphate Royalties Trust; however in the 1990s government expenditures and declining exports eventually led to a halt in the industry. To make matters worse, Nauru’s Phosphate Royalties Trust had significant financial investments overseas property markets which went south. At one time one of the wealthiest countries in the world per capita, Nauru was now desperately seeking avenues for government revenue. Between 1999-2002, Nauru attempted to become a center for offshore banking, but a lack of controls led to alleged money laundering. Nauru was placed on an OECD blacklist and was forced to institute tighter banking sector oversight in order for a ban to be lifted (Freedom House 2001). In 2001, the country faced crippling debt and a court case with Japan over unpaid government bonds (Ballantine 2001). By 2003, Australia’s development agency placed Nauru as a priority to avoid it becoming a failed state in the Pacific. Australian Foreign Minister Alex Downer said, “We can’t just abandon Nauru.” From its perspective of colonial oversight, Australia had internal discussions on how to create a clear plan for Nauru to avoid collapse (Forbes 2003).

Offshore Detention: Extension of a Rentier Economy

In 2001, Australia created the ‘Pacific Solution’ to appease the Australian public concerned about the growing wave of asylum seekers arriving by boat. Australia’s policy promoted use of offshore processing centers to disable asylum seekers from entering Australia, thereby discouraging them from fleeing their homeland (Phillips 2012). During the program’s pause between 2008-2012, Nauru attempted to restart phosphate exports. In 2010, in the wake of the global financial crisis and instability in Myanmar and Afghanistan (including an ongoing war in which Australia is involved), Australia experienced an increase in refugee flows. Under the direction of Labor Prime Minister Julia Gillard, offshore processing centers were re-established by 2012 in Nauru and Papua New Guinea (PNG). In 2013, re-elected Prime Minister Rudd and a coalition government launched Operation Sovereign Borders which determined that irregular arrivals intercepted at sea would never be settled in Australia but rather in PNG, Nauru or another third country (Refugee Council 2016). For Nauru, this meant the refugees could be transformed into a commodity central to the country’s livelihood and relationship with Australia. The detention centers became an extension of Australia’s earlier history with extractive industries, where value is placed on foreign land as part of a major economic and political policy.

Australia’s development aid to Nauru has supported its goal influencing politics and development in the South Pacific. In a speech that both announced the 2013 RPC arrangement with Nauru and detailed more than $90 million in previous aid, Prime Minister Rudd linked the RPC directly to Nauru’s economic situation: “Australia is committed to Nauru’s future development” (India Blooms New Service 2013). For Australia, its assistance to Nauru is a drop in the bucket compared to its total Pacific regional official development assistance. Solomon Islands, Fiji and Vanuatu all receive more annual financial assistance, and lack a tangible project as significant as the RPC involving Australia’s government. The peak of Nauru’s aid was in 2002, when ODA was almost 13 percent of Australia’s Pacific island assistance. In comparison, assistance to Solomon Islands reached over 53 percent of its Pacific island ODA between 2005 and 2006 (AusAID 2010). Rather than a strictly aid donor-recipient relationship, Australia relies on Nauru to support its own key domestic policy. And, for a second time, the policy to re-establish the RPC in Nauru came at a pivotal time for a Nauru government facing financial and political instability.

Despite the lack of attention to Nauru, some scholars such as Kirkpatrick (2017) suggest that Nauru has moved to a post-rentier economy. He posits how Nauru will transition to a sustainable economy in the absence of a viable phosphate export industry. This analysis focuses on phosphate processing because it is an obvious commodity and typical scenario of raw material extraction (Kirkpatrick 2017). However, more attention must be given to the centrality of its rented land to process refugees for revenues that are redistributed by a narrow elite. I suggest that Nauru has extended its rentier status with the RPC rather than transitioning to a post-rentier economy. This opens up a new method to analyze Nauru’s economy, political relationships and apply the lessons it learned from its earlier history.

President Waqa has sought to counter some traditional forces of its rentier relationship with Australia but Nauru’s lack of resources has only led to a limited ability to sway policy and take independent positions. Under Nauruan law, the RPC is owned and administered by the Nauruan government. Australia’s role is to fund the RPC and provide capacity development. The government of Nauru assesses asylum claims, and ensures security for the residents (Australia Senate 2015). In addition, Nauru also accepts refugees as settlers. Operations on Nauru cost the Australian government more than $419,425 per person per year and are growing, according to the National Audit Office. According to Australia’s Department of Foreign Affairs and Trade, “The presence of the RPC has generated substantial revenues for Nauru with a high level of employment (revenue is up from $20 million in 2010-11 to $115 million in 2015-16).” Yet, Nauru faces capacity constraints to effectively use those resources to achieve development outcomes and build resilience.

Impacts on Nauru’s Political System

Nauru’s rentier economy has consequences for its governance. Since independence in 1968, Nauru has been a democratic society that consistently holds free and fair elections, including its election of President Waqa in 2013 and 2016 (Packham 2016). For at least a period, wealth in natural resources can provide stability for all types of governments, authoritarian and democratic alike (Kirkpatrick 2017, p. 4). Yet some have challenged the Nauru government’s commitment to democratic principles in light of its rentier economy. Stewart Firth, in his 2016 article in The Journal of Pacific History, outlines multiple examples where the Waqa government has “undermined democracy.” This includes weakening the judiciary, suspension of Members of Parliament, firing high-ranking public servants and curbing freedom of speech and other civil liberties (Firth 2016). For some of these reasons, New Zealand suspended its official development assistance worth US$750,000 in 2015 (Radio NZ 2015). These examples contradict Australia’s desire to support a stable and prosperous neighbor that can effectively support vulnerable refugee populations. I agree with Firth’s consideration that Australia’s need for Nauru to host its RPC has outweighed the need to condemn or seek to restrain the Nauru government.

Several political crises in Nauru stemming from its rentier economy are complicated by intense personal rivalries. Nauru’s lack of a strong party system means that candidates often run as independents and do not follow a party ideology. Changes in allegiances within government is common. Thus, for operations funded and supported by international actors, the less change in leadership, the better (ADB 2015). Corruption is a critical issue for Nauru (Pollock 2014). In an illustration of Nauru’s political frustrations in 2014, a journalist for The Age wrote that “Politicians in Nauru are elected in the hope that they will resist abusing the privilege of office, as many have before them” (Metcalfe 2014). Allegations have surfaced that President Waqa and Justice Minister David Adeang accepted bribes from an Australian phosphate company in 2009 and 2010. During the investigation in 2013, the police commissioner was suspiciously dismissed (Freedom House 2016). Additionally, Minister Adeang’s wife burned to death and did not allow a formal investigation (Fox 2015). These examples of crises and corruption can be linked to Nauru’s rentier status and create a negative climate for its ability to process and settle refugees.

Nauru has also seen restrictions on the freedom of expression and information during the existence of the RPC. In 2015 allegedly in response to public criticism, the government removed the former manager of internet service provider Digicel and requested that they block all access to Facebook and several other sites. President Waqa maintained that the ban was first to prevent access to pornography, and later to protect Nauruans from bullying (Firth 2016; Farrell 2015). Legal changes were also made to criminalize “‘political hatred’ or any statement deemed likely to threaten public order punishable by up to seven years’ imprisonment” (Firth 2016). Australia has taken advantage of Nauru’s remoteness and imposed strict rules on information gathering and release. Most foreign journalists are barred from entry, and the price of a media visa has climbed to $8,000 per application; yet there is no guarantee that the government will allow the request (Doherty 2016). Workers must sign nondisclosure contracts and whistleblowers can be prosecuted (Cohen 2016). The lack of communication has resulted in restricted access to the RPC and controlled information flows.

Major domestic legal changes required for Nauru to prepare for the RPC have centered on security and refugees. Nauru passed two sets of legislation, the Refugees Convention Act 2012 and the Asylum Seekers (Regional Processing Centre) Act 2012. These laws enabled the Nauru government to process refugees for Australia in exchange for financial support. An interim Joint Advisory Committee was established, co-chaired by officials from both governments to provide oversight (Hamburger 2013, p. 3). As part of the Pacific Police Development Program, Australia’s Attorney-General’s Department has worked with the Department of Justice and Border Control in Nauru to replace the Nauru Criminal Code of 1899 with the Crimes Act 2016, and introduce mental health legislation (DFAT 2016; Nauru Government 2016).

These new laws establish the conditions for refugees to be used as a commodity to replace phosphate and help perpetuate a rentier relationship between Australia and Nauru. Pollock (2014) claims that during phosphate mining, “Nauruan autonomy was overridden by external commercial exploitation. The economics of extracting phosphate dominated while humanitarian issues arising from imposed commercial activity were sublimated.” Because of financial, socioeconomic and political problems, Nauru has become a critical pillar of Australia’s development and security policy for the Pacific.

Impacts on Nauru’s Economy

In addition to domestic political changes, the RPC has prompted Nauru to integrate into international organizations and develop more long-term financial planning. Because of its small size, remoteness, and lack of human resources, Nauru is often neglected in international financial statistics, and has only recently become a member of international financial institutions. Statistics vary regarding the island’s GDP growth and per capita income, but it is clear that Nauru is at relatively full employment and the RPC has supported annual economic growth. In April 2016, Nauru became a member of the World Bank and International Monetary Fund, the organizations’ smallest member by land mass (World Bank 2016). Joining the IMF and World Bank will enable Nauru to have access to more capital and technical expertise and improve its prospects of attaining funding from climate funding mechanisms like the Green Climate Fund. At the same time, these institutions place constraints on Nauru’s policymaking.

The Nauru economy continues to expand, but sources of growth are limited and it is heavily reliant on foreign assistance. The RPC and its related revenue streams dominate, followed by phosphate exports and fishing licenses. As a percentage of GDP, Nauru receives more financial aid than any other Pacific island country (ADB 2014). In 2015-16, Australia provided $25.2 million in Official Development Assistance to Nauru, roughly 20 percent of the Nauru government’s budget. It is no surprise then that Australia is Nauru’s major development partner, along with Taiwan and Japan (DFAT 2015).

Australia’s role in transforming Nauru’s economy to support the RPC through financial assistance, payment for the RPC and technical support is evident. For example, in 2014, visa charges were the largest source of government revenue at $18 million, half of which came from asylum seeker visas paid by Australia (Flitton 2014). Australia maintains a breadth of social, security and economic programs as part of its development agency, but these have implications for Nauru’s ability to host the RPC. The Australian Federal Police run the Nauru Police Force Police Capacity Program which focuses on creating and maintaining “effective governance systems, training and the provision of critical policing resources” (DFAT 2016). Yet, the ADB has been critical of Nauru’s development progress. Education outcomes are improving but still poor. Nauru lacks sufficient residents for key public sector management roles, relying on external technical expertise. According to the ADB, “levels of noncommunicable diseases (i.e., diabetes and cancer) are among the highest in the world” (ADB 2014). Australia’s development programs and direct assistance support areas that reinforce the viability of the RPC like security and infrastructure, but less has been achieved in education and health.

If or when the RPC closes, the Nauru government is shoring up options for long-term financial sustainability. Australia helped Nauru to institute its first income tax in 2016, important for Nauru’s long-term self-sufficiency. In the last 2 years, the government created the Nauru Intergenerational Trust Fund for the people of Nauru (NTF), also with Australia’s support. Sovereign wealth funds help a country to avoid shocks to the economy driven by natural disasters, economic sources, or other uncertainties. According to the ADB, “the purpose of the NTF is to build-up a sufficient principal value that can provide a future stream of public revenue to support investments in education, health, environment and public infrastructure” (ADB 2016). The build-up phase is ongoing and started with Nauru’s $20 million deposit in January 2017.

Both Australia and the international community are concerned about the extent that Nauru relies upon the RPC for its revenues. The Asian Development Bank has warned that “If the RPC is closed, or significantly scaled down, the government could undergo a painful and potentially destabilizing fiscal adjustment. Without access to additional external financing, government spending would have to be severely curtailed” (Rajah 2016, p. 12). Nauru’s GDP has grown from $20,443,291 in 2007 to $100,457,157 in 2015. It peaked in 2014 at $117,023,941. In addition, GDP per capita has gone from slightly over $2,000 in 2007 to close to $10,000 in 2015 (World Bank). While the Nauru government appears to be planning for its future, with or without an RPC, deeper economic analysis is needed to assess long-term implications for its rentier status as it relates to Australia’s asylum seeker policy.

Future of the RPC

The future status of the RPC in Nauru is unclear, as Australia continues to refine its asylum seeker policy. In addition, the existing contractor has stated it will not renew its contract or even rebid in October 2017 (Blakkery 2017). As of March 31, 2017, there were 373 people in the Nauru RPC (Department of Border Protection & Immigration 2017). Current Australian policy precludes anyone who has attempted to travel to Australia illegally from every being allowed to settle in or visit Australia. Having an agreement with Nauru for settlement is handy to appease Australia’s domestic public because it allows the government to still ‘process’ refugees and provide a place, albeit outside of Australia, for them to live. Past practice shows that this policy could change with leadership.

The United Nations, Amnesty International and others have called for the closure of Australia’s Offshore Processing Centers. Primary concerns for critics have been the lengthy time that asylum seekers spend on Nauru to wait for processing and lack of independent security and healthcare provisions (Phillips 2012). In 2013, a major riot broke out which cost $60 million and destroyed most of the RPC buildings (ABC 2013). An official review stated it was caused by the uncertainty that migrants face about their futures and lack of information about their processing status (Hamburger 2013). Additionally, reports by the United Nations High Commission on Refugees show that the detention center on Nauru led to worsened mental health for refugees (UN News Centre 2016). This is problematic not only for the refugees but for those that place the individuals back into society (McKenzie-Murray 2016).

Refugees who settle in Nauru and asylum seekers waiting for processing can provide new economic opportunities for the local community. Currently, the government promotes and participates in events that promote local businesses like restaurants started by refugees. Refugees can provide employment, bring new cultures and a sense of stability. However to effectively be processed and settled into the community they should have sufficient access to resources to cope with their new environment and the situation they have fled.

Conclusion

Nauru remains a rentier economy even though it has replaced resource extraction with the processing and holding of Australia’s unwanted refugees as a primary source of income. Nauru is reliant on its relationship with Australia for RPC funding and aid in order to maintain much needed civil programs and benefits from the contributions of settled refugees. Its continued rentier status also entails problems for its economic future and the status of the country’s democracy. The contract to manage the RPC expires in October, and it is unclear who will step forward to take over the role, leaving the future of the center and Nauru uncertain. Further, the resources including money and infrastructure provided by the RPC are controlled by a small group in Nauru and benefits may not be felt by the whole population. Relatedly, the relationship provides opportunities for corruption in Nauru’s political system. There are ongoing concerns regarding Nauru’s commitment to democratic principles, transparency and press freedom. The development of a rentier economy may hinder democratic processes and promote authoritarian rule.

The RPC places pressures on the small island state to balance its commitments to Australia, international human rights and its public. Nauru shares these concerns with other small states with rentier economies, not least PNG, which also hosts an RPC for Australia. The RPC in Nauru has been established to manage populations fleeing wars, persecution, and impoverishment. We may see an increase of these types of offshore processing centers to manage precarious populations uprooted by man made and environmental disasters. Nauru is an important case study in how these facilities affect local populations.

References

Asian Development Bank. ADB Country Operations Business Plan: 2015-2017. [https://www.adb.org/sites/default/files/linked-documents/cobp-nau-2015-2017-sd-03.pdf]

“Australia Inks New Arrangement with Nauru,” India Blooms New Service, August 6, 2013.

Australian Agency for International Development (AusAID). Statistical Summary: 2005-2008: Australia’s International Aid Program. 2010. [http://dfat.gov.au/about-us/publications/Documents/statsummary.pdf]

Farrell, Paul. “US calls on Nauru to lift restrictions on Facebook and other social media sites.” The Guardian, May 15, 2015. [https://www.theguardian.com/world/2015/may/15/us-calls-on-nauru-to-lift- restrictions-on-facebook-and-other-social-media-sites]

Genevieve Neilson is a 2016 Pacific Security Scholar at the Islands Society. She recently completed her M.A. in International Affairs from The Elliott School of International Affairs at The George Washington University. She also holds a Graduate Certificate from the Bush School of Government and Public Service at Texas A&M University and a B.A. (Honors) in International Relations and Political Science from Victoria University of Wellington, New Zealand. Her research interests include foreign policy and trade in the Asia-Pacific region, public diplomacy, and the Chinese language.

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